Kohl, Leahy, Grassley And Schumer Introduce Bill
To Stop ‘Payoffs’ That Delay Generic Drugs

WASHINGTON (Monday, June 26) -- In the wake of Monday’s Supreme Court refusal to hear the drug patent case, Federal Trade Commission (FTC) v. Schering-Plough, top Senate Judiciary Committee members Herb Kohl (D-WI) and Patrick Leahy (D-VT), Chuck Grassley (R-IA) and Charles Schumer (D-NY) have introduced legislation to explicitly prohibit brand-name drug manufacturers from using pay-off agreements to keep cheaper generic equivalents off the market.

 “When big brand-name drug companies pay generic manufactures to stop generic drugs from reaching pharmacy shelves, consumers lose big-time,” Kohl said. “These companies are playing it fast-and-loose with antitrust law and are padding their profits by forcing families and the federal government to pay far more than we should for prescription drugs. This has got to stop.”

Leahy said, “It is stunning that the U.S. Supreme Court would refuse a request by the Federal Trade Commission to hear a case so important to senior citizens and others needing lower-cost generic medicines.  It is also regrettable that the Administration has sided with big drug companies over seniors and the FTC in pushing for this outcome.”   

In 2005, two appellate court decisions overturned FTC’s long-standing position against this practice and upheld settlements that include such pay-offs. Today’s Supreme Court dismissal of the FTC’s latest appeal prompted lawmakers to introduce this important bill.  This may be the first time in history that the U.S. Solicitor General under any administration has opposed a request by the FTC for the Supreme Court to hear a case of this nature,” said Leahy.

“Sweetheart deals that delay the entry of low cost drugs in the marketplace not only hurt consumers, they also threaten the sustainability of federal health care programs, such as Medicare and Medicaid. Our bill will ensure that the FTC has the ability to look out for the American public, not the profits of drug companies,” Grassley said.

“These deals between big drug companies and small generic competitors are a financial boon for everyone but the consumer,” Schumer said.  “The high cost of prescription drugs is already one of the most daunting problems American families and seniors face today, and these agreements are only increasing this already tremendous financial burden.  The key to lowering drug costs is competition and our legislation would put an end to these backroom deals that undermine true competition.”

A recent FTC report found that in the six months following the 2005 court decisions, there were three settlement agreements in which the generic company received compensation and agreed to a restriction on its ability to market the product.  Additionally, the FTC found that at least seven settlement agreements made in 2006 included a pay-off from the brand manufacturer in exchange for a promise by the generic company to delay entry into the market.

According to a study released earlier this year by Pharmaceutical Care Management Association (PCMA), health plans and consumers could save $26.4 billion over the next five years by using the generic versions of 14 popular drugs that are scheduled to lose their patent protections before 2010. 

Last week, Senator Kohl was successful in including an additional $10 million in the FY ’07 Agriculture Appropriations bill for the Food and Drug Administration’s Office of Generic Drugs, an effort to help reduce the growing backlog of generic drug applications.

In 2003, Senators Grassley and Leahy were able to include their Drug Competition Act in the Medicare Modernization Act. The Drug Act required companies such as Schering-Plough to report all proposed deals with potential generic competitors, which were often previously worked out in secret, to the federal antitrust law enforcers – the FTC and the Justice Department.

Sen. Schumer is also the author of the Greater Access to Affordable Pharmaceuticals Act with Senator John McCain (R-AZ).  The Schumer-McCain law, which was enacted in 2003, shut down loopholes that drug companies created in Hatch-Waxman law, enabling generic drugs to be brought to market sooner, and lowering the cost of prescriptions for millions of Americans.

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